Enabling this sort of thing is Etsy's pitch. I have no particular loyalty to their brand, but in the past they've done a great job living up to that promise for me, and I have to assume others have had similar experiences. If they get filled up by Chinesium knockoffs and the quality sellers are driven off, Etsy's product will no longer hold any value for us, and they will lose our business.
So yes, "let them fail". But before you accuse us of blind, unearned devotion to a brand, you might consider that there is---or once was---a good reason to prefer Etsy over other options.